By Ken Shea It's time once again to announce this year's lineup for the Standard & Poor's PowerPicks Portfolio. The Portfolio represents the collective "best ideas" of the Standard & Poor's equity research staff.
Each of the 35 industry analysts on S&P's equity research staff has chosen one of the stocks they follow as the best-positioned for superior growth. The S&P PowerPicks 2002 Portfolio is diversified across all the 10 S&P economic sectors comprising the S&P 500 index.
The portfolio will be a "frozen" one, meaning that it will undergo no changes throughout the entire year. The objective of the portfolio is to exceed the total return (capital appreciation plus dividends paid) generated by the S&P 500 during the year.
The median capitalization of the S&P PowerPicks 2002 Portfolio is approximately $5 billion, ranging from a high of $209 billion for American International Group to a low of $500 million for Steel Dynamics. By contrast, the median market capitalization of the S&P 500 index is approximately $8.3 billion, ranging from a high of $432 billion for General Electric to a low of $675 million for McDermott International. The S&P PowerPicks 2002 Portfolio is comprised of 17 stocks considered to be large capitalization issues (market cap above $5 billion), 15 mid-cap issues ($1 billion to $4.99 billion), and three small-cap issues (below $1 billion).
The heaviest S&P sector representations within this year's PowerPicks are Information Technology, Health Care, Financials, and Consumer Discretionary, which together comprise nearly two-thirds of the total portfolio's issues.
The S&P PowerPicks Portfolio concept was initiated on January 1, 1997. Since inception, the S&P PowerPicks Portfolio cumulative total return performance through November 30, 2001 was +86.9%, versus +64.5% for the S&P 500 index (both including dividends).
Year-to-date through November 30, the S&P PowerPicks 2001 portfolio total return was 14.5%, versus 12.7% for the S&P 500 index (both including dividends).
Here is the roster for the S&P PowerPicks 2002 Portfolio:
Mkt Cap $Bil.
American International Group
Improving property-casualty premium rates
Strong demand for biopsy testing
Strong drug product pipeline
Leader in orthopedic devices enjoying robust growth
Growth in sales of Provigil neurological disorder treatment
Successfully leveraging its women's casual clothing market niche
Increased need for risk assessment services
Improving product mix seen fueling mid-teen EPS growth
Seen as beneficiary of improving economy. 3%+ yield, takeover kicker
Improvement in online advertising market
Ground business seen picking up as economy strengthens
Strong demand for ion and electron-beam microscopes
Expected improvement in improved equity market environment
Improving demand for outsource manufacturing
Steady EPS grower seen benefiting from recovery in home improvement division
Global Santa Fe
World's second largest offshore driller increasing market presence.
Capitalizing on growing trend toward e-business solution deployments
More focused product mix, recovering fertilizers industry conditions
Rising market share of fragmented mortgage lending industry
Diversified industrial products company seen beneficiary of improving economy
Owner of attractive gas pipeline assets seen benefiting from improved prices
Anticipated rebound in consumer spending, lower funding costs
Maker of microcontrollers seen benefiting from industry upturn in '02
Favorable interest rate envionment, attractive business model
Attractive valuation relative to wireless carrier peers
Improving packaging product demand
Park Place Entertainment
See improved gaming industry conditions, rising free cash flow
See growing demand for co.'s infrastructure resource management
Favorable demographic trends for diagnostic testing
Streamlining product mix, low valuation
New Siebel 7 product release seen spurring growth
Low cost minimill seen benefiting from reduced steel industry capacity
Regulated electic utility generating good, steady EPS growth, 5% yield
Focus on recurring and service revenues generating steady EPS gains
Robust capital spending growth in China's telecom market
Shea is equity research director for Standard & Poor's